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Progressive Policies and the Middle and Poorer Classes

I’m picking on California here, but only for concreteness’ sake—there’s nothing unique about California’s Progressivism.

[California’s] zoning laws, which liberals favor to control “suburban sprawl,” have constrained California’s housing supply and ratcheted up prices. …land restrictions became common in high-income enclaves during the 1970s—coinciding with the burgeoning of California’s real-estate bubble—and have increased income-based segregation and inequality.

California’s staggering labor and energy costs—it has the nation’s most stringent fuel and renewable standards—have helped kill hundreds of thousands of manufacturing jobs in California’s interior. Note: Those are jobs that traditionally served as entry points to the middle class. The Golden State has shed a third of its manufacturing base over the past decade.

California’s non-manufacturing businesses are also moving or expanding operations where labor, land, energy, and capital are cheaper. Comcast announced in the fall that it is moving 1,000 call-center jobs out of California because of the “high cost of doing business.” Facebook, eBay, and LegalZoom have opened up Texas offices in the past few years, while PayPal, Yelp, and Maxwell Technologies have pushed into Phoenix.

California’s small businesses that can’t leave…so easily have been slow to invest because they are financially squeezed. Rents are prohibitive, and Sacramento takes 9.3% of every dollar over $49,000—and 13.3% over $1 million—that an individual or small business owner earns.

Suppose that the Fed raises interest rates to 5% over the next few years. This is a reversion to normal, not a big tightening. Yet with $18 trillion of debt outstanding, the federal government will have to pay $900 billion more in annual interest.

That’s money that could have been committed to actually paying down the debt Progressives have saddled our middle and poorer class grandchildren with: of those $18 trillion, nearly a third was added in the last four+ years. That’s money that could have been committed to lower tax rates so our middle and poorer class families could keep more of what they earned for their own purposes. That’s money that could have been committed to transitioning our Social Security and Medicare programs to defined contribution plans rather than defined benefit ones, so that our middle and poorer class families could have more control over their own families’ future and their own families’ retirement and health expenses.

But wait—there’s still more: consider our Social Security and Medicare programs. They’re going broke—Social Security will be forced to reduce benefit payouts to 75% of current levels by 2035 because the Social Security Trust Fund will run out of money by then, and payouts will come entirely from then-current payroll taxes. Or the government will borrow more (and so raise future taxes) to cover the difference. Or it will raise taxes currently to cover that difference. Either way, those taxes are money taken away from the middle and poorer classes, thereby preventing them from seeing to their own goals and needs as fully as they could. And those future taxes, to cover present borrowing, will rob our children and grandchildren similarly.

Medicare’s Hospital Trust Fund will run dry by 2024, reducing hospital payments to 87% of their current level since these will be entirely dependent on current payroll taxes. Unless the government borrows or raises taxes, with the same deleterious impact on our middle and poorer classes as with Social Security.

Progressives, though, won’t allow any reform for these programs, other than raising taxes on an already overtaxed American citizenry.